Excellence in Governance for healthcare systems: Dianna Morgan of Orlando Health helps lead turnaround

When Dianna Morgan took over as board chair at Orlando (Fla.) Health in 2013, it was not quite like the company where she had long worked, Walt Disney World—the self-proclaimed happiest place on Earth.

The not-for-profit hospital system was losing millions of dollars on its day-to-day operations. It fired CEO Sherrie Sitarik in September 2013, soon after Morgan became chair. And it was evaluating whether it should sell to another organization.

“It's fair to say our strategy was unclear,” said Morgan, 62. “We knew we were operating in a volume environment and needed to make a shift to a value environment, but (we) had not really plotted the road map to make that shift.”

Fast forward to the present. Orlando Health still isn't the Magic Kingdom, but its financial situation is certainly a lot cheerier than before.

The $2.1 billion system posted an 8.7% operating margin in the first quarter of fiscal 2015—well above the not-for-profit industry average—compared with operating losses in the millions a little more than a year before. The system partly credits its turnaround to sizable investments in physicians and outpatient sites. Pay cuts and layoffs also helped improve its finances.

David Strong, president of Rex Healthcare in Raleigh, N.C., was named the new CEO, effective this coming April. And Orlando Health felt confident enough to say no this past June to suitors seeking a merger or partnership, opting to go it alone. Its leaders reached that decision after those suitors told them, “You've got so much going for you.”

“We realized we were really much stronger than we had given ourselves credit for,” said Morgan, who prefers to talk about what “we” did rather than what she did. “Change for an organization is never easy and requires a certain kind of leader—one who brings a steady hand, a lot of credibility, a willingness to communicate openly,” said Linda Chapin, Orlando Health's immediate past board chair. “That's just Dianna.”

For her achievements and service, Morgan is the recipient of Modern Healthcare's Excellence in Governance Award for healthcare systems.

Morgan became an Orlando Health board member in 2002, a year after she retired from Mickey Mouse's Florida home as senior vice president of human resources and public affairs. She had worked for Disney her entire career, starting out supervising the tour guide program in 1971. She previously served as a member of the board of trustees of the University of Florida.

Morgan grew up in Orlando. After graduating from college with a degree in organizational communication, Morgan knew she wanted to stay in the area as she saw Disney starting to expand its empire to Florida. The tour guide job she got in 1971 gave her an appreciation of Disney's rigorous approach to customer service and people management, which she sees as needed in healthcare.

Her learning curve was steep when she joined the Orlando Health board in 2002, she said. But her Disney HR background helped her understand that healthcare needs to be re-engineered. “It was at a time when companies were not spending a whole lot of time managing that cost,” said Morgan, who lives outside Orlando with her husband, Chris.

In 2013, Orlando Health—which includes six adult acute-care hospitals, a medical group practice arm and a Medicare shared-savings accountable care organization—faced a laundry list of problems. The system was losing market share. It is located in a highly competitive market, facing off against Florida Hospital, part of Adventist Health System, and HCA's hospitals in the area.

Soon after Sitarik was fired, in October 2013, Moody's Investors Service downgraded the system's bond rating to A3 from A2. Orlando Health ended its fiscal 2013 with an operational deficit of more than $9.5 million. The management team made several unpopular moves, including pay cuts and layoffs. Tensions were high with nurses who wanted to unionize; a settlement was reached at the end of 2014 to allow nurses to freely organize.

Morgan deflected the blame from Sitarik. Rather, she said “the environment around us called for a different type of leadership.” Dr. Jamal Hakim, an Orlando Health anesthesiologist, was named interim CEO. Orlando Health then had to seriously consider whether to merge or partner with another system.

Chapin credits Orlando Health's turnaround at least partly to Morgan's level-headed personality. She has been direct with board members and the community, seeking to communicate and elicit input from all stakeholders. Morgan, she said, “brought a style of leadership that was just right for those challenges.”

Under Morgan's and Hakim's leadership, Moody's said the system made a series of “disciplined” decisions to right the ship, and it started to see positive results from previous investments in physician practices. “We have seen time and time again that these turnarounds can be swift and impactful,” said Lisa Goldstein, an analyst at Moody's who has followed Orlando Health's progress. “The board gets in gear, and they make tough choices.”

After hiring consulting firm Kaufman Hall, Orlando Health considered eight to 12 serious suitors. The entire process took six months of the board's time in 2014. Morgan held one-on-one meetings with other board members to see how each person felt about the system's direction and the merger question. She did it that way, she said, because “sometimes when you have 19 people in the room, some are reluctant to speak up.”

The board ultimately decided to remain independent, bucking the trend of other similarly sized health systems that have chosen to sell or affiliate. Orlando Health's leaders were convinced that remaining independent would work. “I like to think of myself as an inclusive leader,” Morgan said. “Any decision made is better when you've fully vetted differing views, even dissenting views.”

Although Orlando Health escaped its immediate financial peril, Morgan knows there is a lot of hard work ahead with Strong coming on as CEO. For the future, her organization has to move away from the expensive inpatient model and improve its care coordination to enhance quality and bring down costs, she said. Her system also has to figure out how to cope with Florida's refusal so far to expand Medicaid to lower-income adults, which has led to higher uncompensated-care costs.

Follow Bob Herman on Twitter: @MHbherman